What you need to know about 529s.
Defining 529s
A 529 plan is a type of investment account you can use to save for qualified education expenses. Plans are usually sponsored by states, and ISave 529 is established and sponsored by the State of Iowa.
The term 529 comes from Section 529 of the Internal Revenue Code, which specifies the tax advantages available to those saving in a 529 plan. The investments grow with federally tax-deferred earnings, and distributions are tax free when used to pay for qualified education expenses.
If you’re an Iowa taxpayer, ISave 529 also has additional tax benefits.
Terms to Know
Account Owner: The adult opening an ISave 529 account. This can be just about anybody, including parents, grandparents, other relatives and friends. The Account Owner will also receive the state tax deduction if they are an Iowa taxpayer. Account Owners do not have to live in Iowa, but they must be at least 18 years old, have a valid U.S. Social Security number or Taxpayer Identification Number and a physical address that is not a PO Box.
Beneficiary: The future student, or person the ISave 529 account is opened for. This can be a child, grandchild, friend or even the Account Owner themselves. Beneficiaries do not have to live in Iowa; the only rule is they must be a U.S. citizen or resident alien with a valid Social Security number or other Taxpayer Identification Number.
Qualified Education Expense: Your account can be used for any purpose. However, for your withdrawals to be considered federally tax-free, the money must be used for qualified education expenses. This includes tuition, room and board, computers, textbooks and more at any eligible education institution in the U.S. or abroad. Learn more on our Qualified Expenses page.
Program Description: Outlines the investment objectives, risks, charges, expenses and other important information about ISave 529. Read and consider it carefully before investing.
